RULES FOR AWARDING BONUSES, PROVIDING FINANCIAL ASSISTANCE AND PAYING BONUSES

K. filed a claim against the State Revenue Department for the City of Kostanay, a Republican State Institution (RSI), seeking payment of a bonus.

By a judgment of the Kostanay City Court dated 5 October 2022, the claim was dismissed on the grounds that employee incentives, including the payment of bonuses, constitute an employer's right.

The appellate court found this conclusion of the court of first instance to be unfounded, since orders awarding bonuses had been issued in respect of all employees of the Department, and only those employees who had outstanding disciplinary sanctions were deprived of bonuses. According to the case materials, the claimant's disciplinary liability had been declared unlawful by a court and the relevant disciplinary sanction had been overturned. Accordingly, his right to receive the bonus was subject to restoration.

By a ruling of the Judicial Chamber for Civil Cases dated 29 November 2022, the judgment of the court of first instance was set aside, and a new judgment was rendered granting the claim in full.

By a ruling of a judge of the Supreme Court dated 29 May 2023 (No. 3г-2595), the application for referral of the appellate court's ruling for review under the cassation procedure was refused.

N. filed a claim against a State-Owned Enterprise (SOE) for declaring an order unlawful and setting it aside, as well as for recovery of additional salary payments and a bonus.

By a judgment of the Baikonyr District Court of Astana dated 20 October 2022, the claim was dismissed.

By a ruling of the Judicial Chamber for Civil Cases of the Astana City Court dated 10 January 2023, the judgment of the court of first instance was amended. The part dismissing the claim for declaring unlawful and setting aside the order dated 29 July 2022 imposing a disciplinary sanction in the form of a reprimand was overturned, and a new judgment granting the claim in that part was rendered. The judgment in the part dismissing the claims for additional payments and a bonus was upheld without amendment.

In dismissing the claims seeking an order requiring the employer to calculate additional salary payments and pay a bonus, the courts stated that employee bonuses and other forms of labour incentives are matters falling within the employer's discretion and constitute its unilateral decision.

By a ruling of a judge of the cassation court dated 17 April 2023, the application for referral of the judicial acts for review under the cassation procedure was refused (No. 3г-716(2)).

When resolving disputes of this nature involving civil servants, it should be taken into account that Government Resolution of the Republic of Kazakhstan No. 1127 dated 29 August 2001 approved the Rules for Awarding Bonuses, Providing Financial Assistance and Establishing Allowances to Official Salaries of Employees of the Bodies of the Republic of Kazakhstan at the Expense of the State Budget, as well as for Paying Bonuses to Administrative Civil Servants (hereinafter referred to as the "Rules No. 1127").

Paragraph 1-2 of Rules No. 1127 stipulates that decisions on awarding bonuses, providing financial assistance and establishing allowances to the official salaries of employees of state bodies shall be made by:

1) the head of the state body acting as the administrator of a budget programme (subprogramme), or a person acting in their capacity;

2) the Chief of Staff, subject to approval by the head of the central state body.

Pursuant to paragraph 2 of Rules No. 1127, the persons specified in paragraph 1-2 of these Rules are entitled to independently develop and approve regulations on employee bonuses in the respective bodies, while being guided by these Rules.

The principal performance indicators determining an employee's entitlement to a bonus are set out in paragraph 3 of the Rules.

Under paragraph 4 of Rules No. 1127, no bonus shall be awarded to an employee:

1) if the employee has an outstanding disciplinary sanction;

2) if the employee has worked in the relevant body for less than one month;

3) during the employee's probationary period.

Consequently, where an employee was deprived of a bonus solely because of an outstanding disciplinary sanction, while all other employees were awarded bonuses, and the order imposing disciplinary liability was subsequently declared unlawful and set aside, the employee's claim for recovery of the unpaid bonus is subject to satisfaction.

However, where bonuses are awarded to individual employees, for example, for exemplary performance of official duties, impeccable public service, completion of particularly important and complex assignments, performance of urgent and unforeseen work, or other professional achievements, the matter should be treated as falling within the discretion of the head of the state body.

It should also be noted that a draft law initiated by members of the Mazhilis of Parliament is currently under discussion. It proposes amendments to labour legislation concerning the payment of bonuses, including to employees who have disciplinary sanctions.

JURISDICTION

Pursuant to Article 26 of the Civil Procedure Code (CPC), civil cases in this category fall within the jurisdiction of district courts and courts equated thereto.

M. filed a claim against the State Institution "Department for Coordination of Employment and Social Programmes of the East Kazakhstan Region" seeking reinstatement in employment.

By an order of the Ust-Kamenogorsk City Court dated 26 August 2021, the statement of claim was returned on the grounds that the case fell within the jurisdiction of the Specialized Interdistrict Administrative Court.

The appellate court considered that the court order was subject to reversal for the following reasons.

Pursuant to Part 2 of Article 102 of the Administrative Procedural and Process-Related Code of the Republic of Kazakhstan (hereinafter referred to as the "APPC"), disputes arising from public-law relations are subject to consideration under administrative proceedings. At the same time, under subparagraph 2) of Part 7 of Article 3 of the APPC, cases whose procedural framework is governed by the civil procedural legislation of the Republic of Kazakhstan are not subject to consideration under administrative proceedings.

Disputes arising from public-law relations are disputes between parties to public-law relations, namely relations involving authority and subordination, in which one party is vested with public powers in relation to the other.

However, the subject matter of M.'s claim is an employment dispute concerning the challenge of an order terminating an employment contract, reinstatement in the former position, recovery of wages and compensation for moral damage.

The position adopted by the Judicial Chamber for Civil Cases of the East Kazakhstan Regional Court on this issue should be considered correct.

The Judicial Chamber for Administrative Cases of the Supreme Court of the Republic of Kazakhstan adheres to the same position. By its ruling dated 18 August 2022 (No. 6ап/431), the said Chamber upheld the order of the Specialized Interdistrict Administrative Court of the Zhambyl Region dated 6 December 2021 and the order of the Judicial Chamber for Administrative Cases of the Zhambyl Regional Court dated 12 January 2022.

By those judicial acts, M.'s claim against the Republican State Institution "State Revenue Department for the City of Taraz" seeking to declare unlawful the conclusion issued following an internal investigation and the decision of the disciplinary commission was returned pursuant to subparagraph 11) of Part 2 of Article 138 of the APPC, on the grounds that the case was not subject to consideration under administrative proceedings.

In upholding the judicial acts of the lower courts, the cassation court stated the following.

Pursuant to subparagraph 9) of Article 4 of the APPC, an administrative claim (claim) is a demand submitted to a court for the purpose of protecting and restoring violated or disputed rights, freedoms or legitimate interests arising from public-law relations.

The contested conclusion and the decision of the disciplinary commission are not administrative acts issued by a state body within the framework of public-law relations. They do not create rights or obligations for the claimant and are advisory in nature.

Furthermore, those documents had already been assessed in judicial acts as evidence in the proceedings concerning the claimant's challenge to the order dismissing him from his position.

The jurisdiction of disputes in this category is determined in accordance with the general rules established by Article 29 of the CPC, pursuant to which claims shall be filed with the court at the location of the defendant.

The Judicial Chamber for Civil Cases of the East Kazakhstan Regional Court set aside the judgment of the Ust-Kamenogorsk City Court in a case involving K.'s claim against the Ministry of Ecology, Geology and Natural Resources of the Republic of Kazakhstan (hereinafter referred to as the "RK") seeking to set aside an order imposing a disciplinary sanction. The reason was that the case was subject to consideration at the location of the defendant, namely in Astana.

Pursuant to Part 12 of Article 30 of the CPC, claims against several defendants may, at the claimant's discretion, be filed with the court at the location of any one of the defendants.

E. filed a claim against the Republican State Institution "Transport Police Department of the Ministry of Internal Affairs of the RK" and the State Institution "Kandyagash Railway Station Police Department" seeking to set aside an order.

By an order of the Mughalzhar District Court, the case was transferred to the Saryarka District Court of Astana based on territorial jurisdiction, as the Transport Police Department was located in Astana.

In reversing the order of the court of first instance, the appellate court noted that the second defendant in the case was the State Institution "Kandyagash Railway Station Police Department", with which the claimant was in an employment relationship. Accordingly, the right to file a claim at the location of any one of the defendants belonged to the claimant.

STATE DUTY

Pursuant to subparagraph 1) of Article 616 of the Tax Code, claimants are exempt from paying state duty in courts in claims for recovery of remuneration and other claims related to employment activities.

Accordingly, claimants are exempt from paying state duty in claims seeking:

• to declare an order unlawful and set it aside;
• reinstatement in the former position;
• recovery of wages for the period of forced absence from work;
• recovery of other payments, including unpaid wages, compensation for unused annual leave, etc.

At the same time, it should be noted that labour legislation does not provide for the recovery of compensation for moral damage. When granting such claims, courts are guided by Article 24 of the Constitution of the RK and the provisions of Chapter 47 of the Civil Code (Articles 951 and 952), pursuant to paragraph 14 of the Regulatory Resolution of the Supreme Court "On the Application by Courts of Legislation on Compensation for Moral Damage".

Consequently, claims containing a demand for compensation for moral damage are subject to state duty in the amount of 50% of the monthly calculation index (MCI), as claims of a non-property nature.

Pursuant to Article 117 of the CPC, the state duty from which the claimant was exempt, as well as the costs associated with the proceedings, shall be recovered from the defendant who is not exempt from paying court costs, in favour of the state, in full or in proportion to the part of the claim granted.

According to paragraph 16 of the Regulatory Resolution of the Supreme Court "On the Application by Courts of the Republic of Kazakhstan of Legislation on Court Costs in Civil Cases", the applicable state duty rate is determined depending on whether the claimant is an individual or a legal entity.

Accordingly, where a claim for recovery of wages is granted, state duty in the amount of 1% of the claim amount, as well as 50% of the MCI for each non-property claim, shall be recovered from the defendant in favour of the state.

Pursuant to Article 109 of the CPC, the court shall award to the party in whose favour the judgment was rendered all court costs incurred in the proceedings, to be recovered from the opposing party.

Where a legal entity's claim against an employee for compensation of material damage is granted, the state duty paid by the claimant in the amount of 3% of the claim amount shall be recovered from the employee in favour of the claimant.

By Regulatory Resolution No. 3 of the Constitutional Court of the RK dated 22 February 2023, the wording "when filing an administrative claim, statement of claim (application) in such disputes" contained in paragraph 2 of Article 610 of the Tax Code was declared inconsistent with paragraph 2 of Article 13 and Article 14 of the Constitution of the RK, as it resulted in the infringement and restriction of the constitutional right of every person to judicial protection of their rights and freedoms.

By Law of the Republic of Kazakhstan No. 213-VII dated 20 March 2023, amendments were introduced to Article 610 of the Tax Code, and paragraph 2 was set out in the following wording:

"State duty shall be charged on applications for review of judicial acts under the cassation procedure concerning rulings on the setting aside of arbitration awards and the issuance of writs of execution for the compulsory enforcement of arbitration awards and foreign court judgments, as well as court judgments and rulings in disputes of a non-property and property nature, in the amount of 50 per cent of the applicable state duty rate established by paragraph 1 of this Article for the relevant applicant."

It follows that, when filing an application for cassation review of judicial acts in a claim for compensation of material damage against an employee, the amount of state duty recoverable from the defendant shall be 50% of the applicable rate established for individuals, i.e. 1% of the claim amount rather than 3%.

PRE-TRIAL DISPUTE RESOLUTION PROCEDURE AND TIME LIMIT FOR FILING A CLAIM WITH THE COURT

Article 159 of the Labour Code establishes a mandatory pre-trial procedure for resolving individual employment disputes through consideration by a conciliation commission.

At the same time, this provision contains a number of exceptions.

The requirement to establish a conciliation commission for the consideration of individual employment disputes in accordance with the procedure prescribed by the Labour Code does not apply to certain categories of employees whose employment is governed by the Labour Code of the Republic of Kazakhstan, subject to specific provisions established by special laws and other regulatory legal acts of the Republic of Kazakhstan. These include persons serving in the military, employees of special state and law enforcement agencies, and civil servants.

Thus, the law does not establish a mandatory pre-trial procedure for resolving employment disputes involving civil servants and employees of law enforcement agencies.

A. filed a claim against the State Institution "Healthcare Department of the East Kazakhstan Region" seeking to set aside an order.

By an order of the Ust-Kamenogorsk City Court dated 25 March 2021, the statement of claim was returned pursuant to subparagraph 1) of Part 1 of Article 152 of the CPC.

The court justified the return of the claim on the grounds that the dispute was subject to consideration by the defendant's conciliation commission.

The court order was not appealed. However, as correctly indicated in the analysis prepared by the Judicial Chamber for Civil Cases of the East Kazakhstan Regional Court, that order contradicts the requirements of paragraph 1 of Article 159 of the Labour Code.

The Almaty Regional Court adopted a different position.

By an order of the Konaev City Court dated 17 August 2022, the civil case concerning S.'s claim against the Akim of Konaev (Kapshagay) seeking reinstatement in employment was left without consideration pursuant to subparagraph 1) of Article 279 of the CPC.

By an order of the Judicial Chamber for Civil Cases of the Almaty Regional Court dated 16 November 2022, the order of the court of first instance was upheld.

The courts justified their decisions by stating that, pursuant to the meaning of paragraphs 1 and 2 of Article 159 of the Labour Code, disputes must be mandatorily considered by a conciliation commission. However, the courts failed to take into account that the requirement to establish a conciliation commission does not apply to civil servants.

The Pavlodar Regional Court proposes that the establishment of conciliation commissions in law enforcement agencies be provided for at the legislative level, which would enable conflicts to be resolved internally within the relevant teams and within shorter timeframes.

This proposal is debatable, since, pursuant to Article 4 of the Law "On Law Enforcement Service", one of the special principles of law enforcement service is the principle of unity of command and subordination, which excludes the possibility of establishing a conciliation commission on an equal and parity basis consisting of ordinary employees and heads of law enforcement agencies.

Pursuant to subparagraph 10) of paragraph 1 of Article 4 of the Law "On Civil Service", one of the fundamental principles of civil service is the mandatory implementation by subordinate civil servants and civil servants of lower-level state bodies of decisions adopted by higher-level state bodies and officials within their respective powers.

The proposal of the North Kazakhstan Regional Court to introduce a mandatory pre-trial dispute resolution procedure for civil servants and employees of law enforcement agencies, involving recourse to superior officials in the chain of command and higher-level state bodies, may be supported.

At present, such a right is provided for as an alternative procedure (subparagraph 11) of Article 15 of the Law "On Law Enforcement Service" and paragraph 5 of Article 61 of the Law "On Civil Service").

Pursuant to Article 160 of the Labour Code, the following time limits are established for participants in employment relations who are entitled, under the Labour Code, to apply to court without first referring the dispute to a conciliation commission for the consideration of individual employment disputes:

- in disputes concerning reinstatement in employment – three months from the date on which a copy of the employer's act terminating the employment contract is served on the employee or sent by registered mail with an acknowledgment of receipt;

- in other employment disputes – one year from the date on which the employee, including a former employee, became aware or should have become aware of the violation of their rights.

By an order of the Head of the Police Department of the North Kazakhstan Region dated 24 December 2020, S. was dismissed from the internal affairs bodies. On 11 February 2022, the claimant filed a claim with the court.

By a judgment of Court No. 2 of Petropavlovsk dated 11 March 2022, the claim was dismissed.

The court of first instance reasonably concluded that the claimant had missed, without valid reasons, the time limit for filing a claim with the court established by subparagraph 1) of Article 160 of the Labour Code.

By a judgment of Court No. 2 of Uralsk dated 24 September 2021, which was upheld by the appellate court, J.'s claim against the State Institution "Firefighting and Emergency Rescue Service" seeking reinstatement in employment was dismissed.

The claimant challenged the dismissal effected pursuant to an order dated 24 February 2017. At the preliminary hearing, the defendant's representative filed a motion requesting application of the limitation period. The claimant failed to submit evidence establishing valid reasons for missing the relevant time limit. This circumstance constituted the grounds for dismissing the claim.

The position of the Judicial Chamber for Civil Cases of the West Kazakhstan Regional Court should be supported, namely that Article 185 of the Civil Code of the RK should be applied when determining whether there are grounds for reinstating the limitation period.

REGULATORY FRAMEWORK

The principal regulatory legal acts applicable to the consideration of cases in the category under review include:

- Constitution of the Republic of Kazakhstan;

- Civil Code of the Republic of Kazakhstan (General Part) dated 27 December 1994; Civil Code of the Republic of Kazakhstan (Special Part) dated 1 July 1999 (hereinafter referred to as the "Civil Code");

- Civil Procedure Code of the Republic of Kazakhstan dated 31 October 2015 No. 377-V (hereinafter referred to as the "CPC");

- Labour Code of the Republic of Kazakhstan dated 23 November 2015 No. 414-V (hereinafter referred to as the "Labour Code");

- Code of the Republic of Kazakhstan "On Taxes and Other Mandatory Payments to the Budget" (Tax Code) dated 25 December 2017 No. 120-VI (hereinafter referred to as the "Tax Code");

- Law of the Republic of Kazakhstan dated 23 November 2015 No. 416-V "On Civil Service of the Republic of Kazakhstan" (hereinafter referred to as the "Law on Civil Service");

- Law of the Republic of Kazakhstan dated 6 January 2011 No. 380-IV "On Law Enforcement Service" (hereinafter referred to as the "Law on Law Enforcement Service");

- Law of the Republic of Kazakhstan dated 23 April 2014 No. 199-V "On Internal Affairs Bodies of the Republic of Kazakhstan";

- Law of the Republic of Kazakhstan dated 18 November 2015 No. 410-V "On Combating Corruption";

- Code of Ethics for Civil Servants of the Republic of Kazakhstan, approved by Decree of the President of the Republic of Kazakhstan dated 29 December 2015 No. 153;

- Decree of the President of the Republic of Kazakhstan dated 29 December 2015 No. 152, approving:

• the Rules and Time Limits for Conducting Performance Assessments of Civil Servants;
• the Rules and Time Limits for Rotation, as well as the Categories and Positions of Civil Servants Subject to Rotation;
• the Rules for Imposing Disciplinary Sanctions on Civil Servants;

- Regulatory Resolutions of the Constitutional Court of the Republic of Kazakhstan:

• dated 6 March 2023 No. 4 "On рассмотрение of the Compliance with the Constitution of the Republic of Kazakhstan of Subparagraph 6) of Paragraph 3 of Article 16 of the Law of the Republic of Kazakhstan 'On Civil Service of the Republic of Kazakhstan'";
• dated 22 February 2023 No. 3 "On рассмотрение of the Compliance with the Constitution of the Republic of Kazakhstan of Subparagraph 1) of Paragraph 1 and Paragraph 2 of Article 610 of the Code of the Republic of Kazakhstan dated 25 December 2017 'On Taxes and Other Mandatory Payments to the Budget' (Tax Code)";

- Regulatory Resolutions of the Supreme Court of the Republic of Kazakhstan:

• dated 6 October 2017 No. 9 "On Certain Issues of Application by Courts of Legislation in the Resolution of Employment Disputes";
• dated 27 November 2015 No. 7 "On the Application by Courts of Legislation on Compensation for Moral Damage";
• dated 11 July 2003 No. 5 "On Court Judgments in Civil Cases";
• dated 25 December 2006 No. 9 "On the Application by Courts of the Republic of Kazakhstan of Legislation on Court Costs in Civil Cases".

Order of the Minister of Internal Affairs of the Republic of Kazakhstan dated 27 May 2011 No. 246 "On Certain Issues of Service in the Internal Affairs Bodies of the Republic of Kazakhstan" (hereinafter referred to as "Order No. 246"). This Order was repealed by Order of the Minister of Internal Affairs of the Republic of Kazakhstan dated 22 October 2022 No. 830.

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